Attached files
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (date of earliest event reported): July 2, 2010
B2 HEALTH, INC.
----------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 333-145999 20-4456503
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(State or other jurisdiction (Commission File No.) (IRS Employer
of incorporation) Identification No.)
701 Market Street St.
Augustine, FL 32095
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(Address of principal executive offices, including Zip Code)
Registrant's telephone number, including area code: (904) 825-0873
7750 North Union Blvd., #201
Colorado Springs, CO 80920
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(Former name or former address if changed since last report)
Item 1.01 Entry Into a Material Definitive Agreement
ACQUISITION OF BFK FRANCHISE COMPANY, LLC
The Company was formed in March 2006 to design, manufacture and sell
chiropractic tables and beds. The Company generated only limited revenue and
essentially abandoned its business plan in March 2008.
On July 2, 2010 the Company acquired BFK Franchise Company, LLC, a
StateplaceNevada limited liability company formed in May 2009, for 9,000,000
shares of the Company's common stock.
Between the date of its formation (May 19, 2009) and July 2, 2010 (the date
of its acquisition by the Company), BFK sold membership units to the persons
listed above. BFK, which received $50,000 for the sale of the membership units,
relied upon the exemption provided by Section 4(2) of the Securities Act of 1933
in connection with the sale of the membership units. The persons that acquired
the membership units were sophisticated investors and were fully informed, prior
to their acquisition of the membership units, as to the business and financial
condition of BFK.
BUSINESS OF BFK
BFK, which conducts business under the trade name, BRICKS 4 KIDS(R),
offers programs designed to teach principles of engineering, architecture and
physics to children ages 3-12+ using LEGO(R) bricks. BFK provides classes (both
in school and after school), special events programs and day camps that are
designed to enhance and enrich the traditional school curriculum, trigger young
children's lively imaginations and build self-confidence. BFK's programs foster
creativity and provide a unique atmosphere for students to develop problem
solving and critical thinking skills by designing and building machines,
catapults, pyramids, race cars, buildings and numerous other systems and devices
using LEGO(R) bricks.
Lego Bricks
LEGO(R) is a line of construction toys manufactured by the Lego Group, a
privately held company based in Billund, Denmark. The flagship product, Lego,
consists of colorful interlocking plastic bricks and an accompanying array of
gears, minifigures and various other parts. Lego bricks can be assembled and
connected in many ways to construct such objects as vehicles, buildings, and
even working robots. Anything constructed can then be taken apart, and the
pieces used to make other objects. The toys were originally designed in the
1940s in Europe and have achieved an international appeal, with an extensive
subculture that supports Lego movies, games, video games, competitions, and four
Lego themed amusement parks.
Lego pieces of all varieties are a part of a universal system. Despite
variation in the design and purpose of individual pieces over the years, each
remains compatible in some way with existing pieces. Lego bricks from 1958 still
interlock with those made in 2010, and Lego sets for young children are
compatible with those made for teenagers.
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Bricks, beams, axles, gears, mini figures, and all other parts in the Lego
system are manufactured to an exacting degree of precision. When snapped
together, pieces must have just the right amount of strength and flexibility
mixed together to stick together. They must stay together until pulled apart.
They cannot be too easy to pull apart, or the resulting constructions would be
unstable; they also cannot be too difficult to pull apart, since the disassembly
of one creation in order to build another is part of the Lego appeal.
Since it began producing plastic bricks, the Lego Group has released
thousands of sets themed around a variety of topics including town and city,
space, robots, pirates, Lego Trains, Racers, Vikings, , Bionicle, dinosaurs,
holiday locations, scuba diving and undersea exploration, the wild west, the
Arctic, airports and miners.
The Lego range has expanded to encompass accessory motors, gears, lights,
sensors, and cameras designed to be used with Lego components. Motors, battery
packs, lights and switches are sold under the name Power Functions. The Technics
line utilizes newer types of interlocking connections that are still compatible
with the older brick type connections. The Technics line can often be motorized
with Power Functions.
Lego initiated a robotics line of toys called "Mindstorms" in 1998, and
has continued to expand and update this range ever since. The product originated
from a programmable brick developed at the MIT Media Lab and the name is taken
from a paper written by a computer scientist and educator who developed the
educational theory of constructionism, and whose research was at times funded by
the Lego Group.
The programmable Lego brick which is at the heart of these robotics sets
has undergone several updates and redesigns, with the latest being called the
'NXT' brick, and sold under the brand name of Lego Mindstorms NXT 2.0 or 1.5.
The set includes sensors that detect touch, light, sound and ultrasonic waves,
with several others being sold separately, including an RFID reader. The
intelligent brick can be programmed using software available for both Windows
and Mac computers, and is downloaded onto the brick via Bluetooth.
Current Programs Offered by BFK
-------------------------------
In-school field trips. One-hour classes during school hours. Classes are
correlated to the science for a particular grade level. Teacher guides, student
worksheets, and step-by-step instruction are provided. Recommended fees: $5-$8
per student.
After-school classes. One hour, one day a week class held after school.
Recommended fees: $10-$15 per class per child, minimum commitment is usually 4
classes.
Pre-school classes. Classes can be held in pre-schools for children of
pre-school ages. Recommended fees; $5-$7 per child.
Classes for home-schooled children. Classes can be held in the home of one of
the parents of a home-schooled child. Recommended fees: $8-$10 per child.
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Camps. Normally 3 hours per day for 5 days. Camps can take place at schools or
at other child-related venues. Children use Lego(R) bricks to explore various
science and math concepts while working in an open, friendly environment. The
material covered each session varies depending on students' ages, experience,
and skill level. A new project is built each week. Architectural concepts are
taught while assembling buildings, castles and other structures. Instructional
content includes concepts of friction, gravity and torque, scale, gears, axles
and beams. The curriculum can include the construction of a scaled model of the
children's school or the school mascot. The children work and play with
programmable LEGO(R) bricks along with electric motors, sensors, system bricks,
and LEGO(R) Technic pieces (i.e. gears, axles, and beams). Recommended fees:
$125-$150/child. Children go home with a small Lego(R) project (cost about
$5/child)
Birthday Parties. In the home of the birthday child. Recommended fees: $150 per
party up to 10 children. If over 10 children the fee is $10/child.
Special Events. Activities with Lego(R) bricks can be held in various locations
including church centers, lodges, child-related venues, private schools,
pre-schools, etc. Program can include parents, grandparents and all children in
the family. Recommended fees: $5 per family.
Operating Units
---------------
BFK operates through Corporate Creativity Centers and franchisees.
A Corporate Creativity Center is a store-front location, owned and
operated by BFK, where BFK coordinates in school field trips, after school
classes, parties, camps and other programs - as well as the retail sales of
LEGO(R) merchandise.
As of June 30, 2010 BFK had:
o One Corporate Creativity Center in Florida;
o Eleven franchises in eight states and one foreign country;
Franchise Program
-----------------
A franchisee pays a one-time, non-refundable franchise fee of $22,000
upon the execution of the franchise agreement and is required to pay BFK a
royalty of 7% of the amount received from the operation of the franchise.
The franchisee is granted an exclusive territory and a license to use the
"Bricks 4 Kidz(R)" name and trademarks in the franchised territory. The
franchisee is required to conform to certain standards of business practices.
Each franchise is run as an independent business and, as such, is responsible
its operation, including employment of adequate staff.
Franchisees are permitted to assign their franchise provided that BFK
receives advance notice of the proposed assignment, the transferee assumes the
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obligations under the franchise agreement, the transferee meets certain
conditions and qualifications, and BFK receives a $5000 transfer fee.
The term of the franchise is for ten years. BFK has the right to
terminate any franchisee in the event of the franchisee's bankruptcy, a default
under the franchise agreement, or other events. The franchisee has the right to
renew the franchise for an additional ten years if, at the time of renewal, the
franchisee is in good standing and pays a renewal fee in the amount of $5000.
In addition to the $22,000 franchise fee, a franchisee is advised that an
additional investment of between $8,000 and $23,000 will be required for such
things as equipment and supplies, insurance, marketing and working capital
during the start-up phase of the business.
Competition
-----------
To the best of BFK's knowledge, there are no companies franchising a model
similar to that of Bricks 4 Kidz(R). However, Play-Well Teknologies, with
offices in San Anselmeo and Pleasanton, California, offers after-school classes,
camps and birthday parties using Lego(R) bricks. Vision Education and Media
offers after school classes using Lego(R) bricks in its office in CityplaceNew
York City, StateNY. In addition, several other small businesses around the
country offer after-school classes and vacation camps using Lego(R) bricks.
These classes camps are typically held in elementary schools, middle schools and
community colleges.
Government Regulation
---------------------
The offer and sale of franchises, and the operations of franchises in some
respects, are regulated by the Federal Trade Commission and some state
governments.
In 1979 the Federal Trade Commission promulgated what became known as the
FTC Franchise Rule. The FTC Franchise Rule requires detailed disclosure of a
wide variety of information as a condition to selling a franchise, but the rule
does not regulate the franchise relationship or require any filing or
registration on the part of a franchisor. The FTC Franchise Rule requires that
the franchisor provide a disclosure statement or prospectus to each prospective
buyer prior to execution of a contract or payment of money relating to the
franchise relationship.
However, the FTC Franchise Rule is narrow and does not preempt state law,
which often is stricter than the FTC Franchise Rule. As such, numerous states
require franchise disclosure documents to be registered with the state
authorities, and numerous states regulate the franchise relationship itself.
California, Florida, Hawaii, Illinois, Indiana, Maryland, Michigan,
Minnesota, New York, North Dakota, Rhode Island, South Dakota, Texas, Utah,
Virginia, Washington and Wisconsin all have franchise statues and regulations
which typically require a franchisor to file or register its offering with the
state government and to provide all prospective franchisees with the disclosure
document.
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In these so called "registration states", state regulatory agencies
review the franchisor's registration application, the franchise disclosure
document, the proposed franchise agreement and any other agreements franchisees
must sign. State regulators also review the financial condition of the
franchisor, the background of the franchisor's executives and sales agents and
provisions regarding the rights and remedies of the franchisor and the franchise
as provided in the franchise agreement. These state agencies can deny
registration if they believe that the sale of the franchise would be deceptive
in any way.
Numerous other states have laws regulating various facets of the
relationship between the franchisee and franchisor. These "relationship laws"
typically regulate franchisors' ability to terminate or refuse renewal of a
franchise, contain provisions requiring that a franchisor have "good cause"
before terminating or refusing to renew a franchise and may also address other
issues such as the right of a deceased franchisee's heirs to continue the
franchise after the original investor's death. Some laws require a franchisor to
buy back excess inventory from the franchisee in the even of termination. Some
state laws make it illegal for a franchisor to demand a general release from a
franchisee as a condition of renewing or entering into a new agreement.
Under the FTC Franchise Rule, the FTC has the authority to seek civil
penalties against a franchisor for violations of the FTC Franchise Rule. Each of
the "registration states" has similar authority to seek penalties for violations
of their requirements. Violations may include the offer or sale of an
unregistered franchise, failing to timely provide the disclosure document to a
prospective franchisee or making misrepresentations in the franchise disclosure
documents. Additionally, officers of the franchisor may have personal liability
if they had knowledge of or participated in the violations.
Individuals cannot sue a franchisor for a violation of the FTC Franchise
Rule. However, most of the pre-sale disclosure states grant a private right of
action for violation of the state statue and have remedies that typically
include damages, rescission of the franchise agreement and attorneys' fees.
General
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BFK executive offices are located at 701 Market Street, Suite 105B, St.
Augustine, FL. BFK leases this space at a rate of $400 per month until June 30,
2010.
As of June 30, 2010 BFK employed three persons on a full time basis.
BFK's website is www.bricks4kidz.com.
LEGO(R) is a registered trademark of the LEGO(R) Group of companies which
do not sponsor, authorize or endorse BFK's programs or its website.
MANAGEMENT
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Following the acquisition of BFK, John Quam resigned as an officer and
director and the following persons were then appointed as the new management of
the Company:
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Name Age Position
---- --- --------
Brian Pappas 59 President, Principal Financial Officer,
Principal Accounting Officer, Secretary
and a Director
Michelle Cote 40 Founder and a Director
Dan O'Donnell 40 Vice President of Operations and a Director
Jeff Pappas 56 Vice President of New Business Development
The Company's directors serve until the next annual meeting of the
Company's shareholders and until their successors have been duly elected and
qualified. The Company's officers serve at the discretion of the Company's
directors. The Company does not compensate any person for acting as a director.
Information concerning the Company's new management follows:
Brian Pappas has been an officer and Managing Member of BFK since May 2009.
Between 1981 and 1998 Brian Pappas owned and operated (with his brother Jeff),
Together Development Corporation, which sold franchises under the trade name
"Together Dating Service." Mr. Pappas and his brother grew Together Development
Corporation from 12 franchises to over 175 franchises which were located
throughout the US, Canada, England, Netherlands and Germany. After Mr. Pappas
sold Together Development Corporation in 1998 he opened Skater Paradise, Inc,
which operated a chain of indoor skate parks in Massachusetts. After selling
Skater Paradise, Inc in 2004 Mr. Pappas, until April, 2009, provided consulting
services, and in some instances acted as the franchise development director for
Zen Massage Center, Gourmet, Shape up Sisters, Digicom Specialties, The Online
Outpost, and Auction-It-Today. In the spring of 2009, Mr. Pappas met with
Michelle Cote, the founder of Bricks 4 Kidz, and together they formed BFK in May
2009. Between 1981 and 1998 Mr. Pappas also co-owned and operated two
advertising agencies, Cushing & Pappas and The Thought Process. Mr. Pappas
graduated from Colgate University in 1973 with a Bachelor of Arts degree in
mathematics and music.
Dan O'Donnell has been an officer and Vice President of Operations of BFK
since April 15, 2010. Between October 2009 and his association with BFK, Mr.
O'Donnell developed the Franchise Marketing Tool (FMT) for BFK, which is an
essential component of the Bricks 4 Kidz franchise model. Between May 2000 and
October 2009 Mr. O'Donnell was the Director of Franchise Operations for The
Whole Child Learning Company, a franchisor of children's educational services,
where he was responsible for the oversight of all daily operational activities,
franchisee training and ongoing franchisee support. Mr. O'Donnell began his
career in 1994 when he developed and launched a computer education program for
children called Computer Kids Unlimited in Pittsburgh. Mr. O'Donnell attended
the University of Pittsburgh at Titusville August 1987 to May 1988 and Richard
Bland College August 1988 to May 1990 where he studied Business Administration.
Jeff Pappas has been an officer and Vice President of New Business
Development of BFK since April 15, 2010. Between 2007 and 2010, Mr. Pappas was
the President/Managing Director for Bottom Line Group, a firm that provided
consulting services to middle market food and beverage clients in the areas of
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corporate finance, corporate strategy, human resources, equity analysis, startup
management, and intellectual property. Between 2003 and 2006 Mr. Pappas was a
partner and Director for Acceleron Group, LLC, an agency similar to Bottom Line
Group. Mr. Pappas received his Bachelor of Arts degree from Denison University
(Granville, Ohio) in 1976.
Michelle Cote co-founded BFK in May 2009 and founded Bricks 4 Kidz in June,
2008. In her capacity as "founder", Ms. Cote advises BFK in the areas of
creative development and new programs. Ms. Cote developed the Bricks 4 Kidz
concept and since early 2008 has been operating after-school classes, camps and
birthday parties using LEGO(R) bricks. Between 2005 and 2008 Ms. Cote was a free
lance architectural draftsman. Prior to that time Ms. Cote worked for an
architectural firm in St. Augustine, FL. Ms. Cote received her B.A. degree from
Flagler College in St. Augustine in 1991 with a major in Spanish/Latin American
studies and graduated Cum Laude.
The Company's directors are not independent directors as that term is
defined in section 803 of the listing standards of the NYSE AMEX. No director is
a "financial expert" as that term is defined in the regulations of the
Securities and Exchange Commission.
Between the date of its formation (May 19, 2009) and May 31, 2010 BFK paid
Brian Pappas, its Chief Executive Officer, $80,000 in the form of a salary and
commissions on franchise sales. No executive officer of BFK received
compensation in excess of $100,000 during this period.
The following shows the amounts the Company expects to pay to its officers
during the twelve months ending June 30, 2011 and the amount of time these
persons expect to devote to the Company.
% of time
Projected to be devoted to
Name Compensation (1) Company's business
---- ---------------- ------------------
Brian Pappas $10k/month 100%
Michelle Cote $ 5k/month 50%
Dan O'Donnell $ 8K/month 100%
Jeff Pappas $ 8k/month 100%
(1) Amounts do not include commissions on franchise sales or bonuses. Bonuses
will be awarded in the discretion of the Company's directors.
Michelle Cote, an officer and director of the Company, owns and operates a
Corporate Learning Center which covers St. Johns County, FL. As Ms. Cote was one
of BFK's founders, Ms. Cote did not pay BFK any fees, and does not pay BFK any
royalties, with respect to this Corporate Learning Center.
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PRINCIPAL SHAREHOLDERS
----------------------
The following table shows the ownership, following the acquisition of BFK,
of those persons owning beneficially 5% or more of the Company's common stock
and the number and percentage of outstanding shares owned by each of the
Company's directors and officers and by all officers and directors as a group.
Unless otherwise indicated, each owner has sole voting and investment power over
their shares of common stock.
Shares % of Outstanding
Name Owned Shares
---- ----- ----------------
Brian Pappas 2,599,000 (1) 26.5%
Michele Cote 1,800,000 (2) 18.4%
Dan O'Donnell 100,000 1%
Jeff Pappas 125,000 1.3%
Equity Trust Company,
Custodian for Mark Shaw IRA 321,000 3.3%
(All officers and directors
as a group 4 persons) 4,624,000 47.2%
(1) Shares are held of record by FranVentures, LLC, a limited liability company
managed by Mr. Pappas.
(2) Shares are held of record by MC Logic, LLC, a limited liability company
controlled by Mr. Cote.
DESCRIPTION OF SECURITIES
-------------------------
Common Stock
------------
The Company is authorized to issue 50,000,000 shares of common stock.
Holders of the Company's common stock are each entitled to cast one vote for
each share held of record on all matters presented to the shareholders.
Cumulative voting is not allowed; hence, the holders of a majority of the
Company's outstanding common shares can elect all directors.
Holders of the Company's common stock are entitled to receive such
dividends as may be declared by the Company's Board of Directors out of funds
legally available and, in the event of liquidation, to share pro rata in any
distribution of the Company's assets after payment of liabilities. The Company's
Board of Directors is not obligated to declare a dividend. It is not anticipated
that dividends will be paid in the foreseeable future.
Holders of the Company's common stock do not have preemptive rights to
subscribe to additional shares if issued. There are no conversion, redemption,
sinking fund or similar provisions regarding the common stock. All outstanding
shares of common stock are fully paid and nonassessable.
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Preferred Stock
---------------
The Company is authorized to issue 10,000,000 shares of preferred stock.
Shares of preferred stock may be issued from time to time in one or more series
as may be determined by the Company's Board of Directors. The voting powers and
preferences, the relative rights of each such series and the qualifications,
limitations and restrictions of each series will be established by the Board of
Directors. The Company's directors may issue preferred stock with multiple votes
per share and dividend rights which would have priority over any dividends paid
with respect to the holders of the Company's common stock. The issuance of
preferred stock with these rights may make the removal of management difficult,
even if the removal would be considered beneficial to shareholders generally,
and will have the effect of limiting shareholder participation in transactions
such as mergers or tender offers if these transactions are not favored by the
Company's management. As of April 30, 2010, the Company had not issued any
shares of preferred stock.
Transfer Agent
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Corporate Stock Transfer
3200 Cherry Creek Drive South, Suite 430
Denver, Colorado 80209
Phone: 303-282-4800
Fax: 303-282-5800
INDEMNIFICATION
---------------
The Company's Bylaws authorize indemnification of a director, officer,
employee or agent against expenses incurred by him in connection with any
action, suit, or proceeding to which he is named a party by reason of his having
acted or served in such capacity, except for liabilities arising from his own
misconduct or negligence in performance of his duty. In addition, even a
director, officer, employee, or agent found liable for misconduct or negligence
in the performance of his duty may obtain such indemnification if, in view of
all the circumstances in the case, a court of competent jurisdiction determines
such person is fairly and reasonably entitled to indemnification. Insofar as
indemnification for liabilities arising under the Securities Act of 1933 may be
permitted to the Company's directors, officers, or controlling persons pursuant
to these provisions, the Company has been informed that, in the opinion of the
Securities and Exchange Commission, such indemnification is against public
policy as expressed in the Act and is therefore unenforceable.
Item 2.01 Completion of Acquisition or Disposition of Assets
See Item 1.01 of this report.
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Item 3.02 Unregistered Sales of Equity Securities
See Item 1.01 of this report. The shares issued in connection with the
acquisition of BFK were restricted securities, as that term is defined in Rule
144 of the Securities and Exchange Commission. The Company relied upon the
exemption provided by Section 4(2) of the Securities Act of 1933 with respect to
the issuance of these shares. The persons who acquired these shares were all
provided with information concerning the Company prior to the acquisition of
their shares. The certificates representing the shares will bear legends stating
that the shares may not be offered, sold or transferred other than pursuant to
an effective registration statement under the Securities Act of 1933 or pursuant
to an applicable exemption from registration. No commissions were paid in
connection with this transaction.
Item 5.01 Changes in Control of Registrant
See Item 1.01 of this report.
Item 5.02 Departure of Directors or Certain Officers; Election of Directors;
Appointment of Certain Officers; Compensatory Arrangements of Certain
Officers
See Item 1.01 of this report.
Item 5.06 Change in Shell Company Status
See Item 1.01 of this report.
Item 9.01 Financial Statements and Exhibits
(a) Financial Statements of BFK Franchise Company, LLC
(b) Pro Forma Financial Statements
(c) Exhibits
Number Description
------ ------------
10.1 Agreement relating to the acquisition of BFK Franchise
Company, LLC
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: July 7, 2010
B2 HEALTH, INC.
By: /s/ Brian Pappas
----------------------------
Brian Pappas, President
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BFK FRANCHISE COMPANY, LLC
DECEMBER 31, 2009
TABLE OF CONTENTS
Page
----
Independent Auditor's Report
Balance Sheet 1
Statement of Income and Members' Equity 2
Statement of Cash Flows 3
Notes to Financial Statements 4-5
Consent of Independent Certified Public Accountants 6
LENNING & CO., INC.
CERTIFIED PUBLIC ACCOUNTANTS
18377 Beach Blvd., Ste. 211
Huntington Beach, CA 92648
(714) 893-0646
Fax (714) 596-7152
INDEPENDENT AUDITOR'S REPORT
----------------------------
To the Managing Members of
BFK Franchise Company, LLC
We have audited the accompanying balance sheet of BFK Franchise Company, LLC as
of December 31, 2009, and the related statements of income and member's equity,
and cash flows for the period from May 19, 2009 (inception) to December 31,
2009. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the placecountry-regionUnited States of America. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above presents fairly, in
all material respects, the financial position of BFK Franchise Company, LLC as
of December 31, 2009, and the results of its operations and its cash flows for
the period from May 19, 2009 (inception) to December 31, 2009 in conformity with
accounting principles generally accepted in the United States of America.
April 23, 2010
BFK FRANCHISE COMPANY, LLC
BALANCE SHEET
DECEMBER 31, 2009
ASSETS
CURRENT ASSETS
Cash $ 33,907
Accounts receivable 29,000
Note receivable - related party 500
Security deposit 200
---------------------
Total current assets 63,607
---------------------
Total assets $ 63,607
=====================
LIABILITIES AND MEMBERS' EQUITY
CURRENT LIABILITIES
Accounts payable $ 9,269
Note payable - related party 650
---------------------
Total current liabilities 9,919
MEMBERS' EQUITY 53,688
---------------------
Total liabilities and members' equity $ 63,607
=====================
2
BFK FRANCHISE COMPANY, LLC
STATEMENT OF INCOME AND MEMBERS' EQUITY
FOR THE PERIOD FROM MAY 19, 2009 (INCEPTION) TO DECEMBER 31, 2009
REVENUES $ 127,984
OPERATING EXPENSES
Commissions 31,572
Advertising and promotion 30,061
Consulting 24,657
Training 10,510
Office expenses 10,058
Travel and entertainment 7,200
Legal and professional 3,220
Rent 2,973
Taxes and licenses 1,765
Miscellaneous 1,555
Equipment rental 725
-------------
Total operating expenses 124,296
-------------
NET INCOME 3,688
MEMBERS' EQUITY, beginning of period -
MEMBERS' CONTRIBUTION 50,000
-------------
MEMBERS' EQUITY, end of period $ 53,688
=============
3
BFK FRANCHISE COMPANY, LLC
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM MAY 19, 2009 (INCEPTION) TO DECEMBER 31, 2009
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 3,688
Adjustment to reconcile net income to net cash
used by operations:
Increase in:
Accounts receivable (29,000)
Note receivable (500)
Security deposit (200)
Increase in:
Accounts payable 9,269
-------------
Net cash used by operating activities (16,743)
-------------
CASH FLOWS FROM FINANCING ACTIVITIES
Member contribution 50,000
Note payable 650
-------------
Net cash provided by financing activities 50,650
-------------
NET INCREASE IN CASH 33,907
CASH, beginning of period -
-------------
CASH, end of period $ 33,907
=============
4
BFK FRANCHISE COMPANY, LLC
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2009
NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The summary of significant accounting policies of BFK Franchise Company, LLC is
presented to assist in the understanding of the Company's financial statements.
The financial statements and notes are representations of the Company's
management, who is responsible for their integrity and objectivity.
Organization - BFK Franchise Company, LLC was organized in Nevada on May 19,
2009. The Company is engaged in the business of selling Bricks 4 Kidz franchise
rights within a defined exclusive territory that provide project-based programs
to teach principles and methods of engineering to children ages 3 to13, using
LEGO bricks. The company is located in St. Augustine, Florida.
Pursuant to the Operating Agreement, Fran Ventures, LLC is the managing member.
All profits and losses shall be apportioned among the members as follows (except
as required by Section 704 of the Code):
Franventures,
LLC 46.65%
Mc Logic, LLC 30.00%
Equity Trust Company, FBO, Mark Shaw IRA 8.35%
Fishing 4 Funds, LLC 5.00%
Starla Hersey 5.00%
Entrust Administration Services, Inc., FBO Henry James
Tabeling IRA 5.00%
------------
100.00%
============
Use of estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect certain amounts and disclosures. Accordingly, actual
results could differ from those estimates.
Cash and cash equivalents - For purposes of the statement of cash flows, the
Company considers all short-term securities purchased with a maturity of three
months or less to be cash equivalents. There were no cash equivalents at
December 31, 2009.
Income taxes - The Company files its income tax returns as a partnership for
Federal and State income tax purposes. As such, the Company does not pay income
taxes, as any income or loss will be included in the tax returns of the
individual members. Accordingly, no provision or liability for income taxes has
been made in the accompanying financial statements.
NOTE 2 - LEASE COMMITMENT
The Company entered into a lease agreement for its office space, which commenced
on June 1, 2009 and expires on May 31, 2010. The Company leases its office space
for $400 per month. The security deposit is $200.
5
Future minimum facilities lease payments under the operating lease are as
follows:
Year ended December 31,
-----------------------
2010 $ 1,000
=========
NOTE 3 - RELATED PARTY TRANSACTIONS
Managing member, Franventures, LLC, was paid a total of $22,500 in 2009 for
consulting services. Pursuant to the operating agreement, Franventures, LLC will
be paid an initial monthly retainer of $2,500. This monthly retainer will
increase as the number of operating franchises increases. Member, Mc Logic, LLC,
was paid a total of $10,450 in 2009 for Franchising training.
A note receivable from Fishing 4 Funds, LLC, in the amount of $500 is expected
to be received on or before December 31, 2010, at the interest rate of 5% per
annum.
A note payable to Franventures, LLC in the amount of $650 is due on or before
December 31, 2010, at the interest rate of 5% per annum.
6
BFK FRANCHISE CO., LLC
MARCH 31, 2010
INTERIM FINANCIAL STATEMENTS
(Unaudited)
BFK Franchise Co., LLC
(A Development Stage Company)
BALANCE SHEETS
March 31, December 31,
2010 2009
-------- ------------
Unaudited)
ASSETS
Current assets
Cash $ 32,703 $ 33,907
Accounts receivable 29,000 29,000
Note receivable - related party 500 500
Security deposit 200 200
------------ ------------
Total current assets 62,403 63,607
------------ ------------
Total Assets $ 62,403 $ 63,607
============ ============
LIABILITIES & STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 9,927 $ 9,269
Note payable - related party 650 650
------------ ------------
Total current liabilities 10,577 9,919
------------ ------------
Total Liabilities 10,577 9,919
------------ ------------
Members' Equity
Members' equity 50,000 50,000
Accumulated earnings 1,826 3,688
------------ ------------
Total Stockholders' Equity 51,826 53,688
------------ ------------
Total Liabilities and Stockholders' Equity $ 62,403 $ 63,607
============ ============
The accompanying notes are an integral part of the consolidated financial
statements.
1
BFK Franchise Co., LLC
(A Development Stage Company)
STATEMENT OF INCOME AND MEMBERS' EQUITY
(Unaudited)
Three Month
Period Ended
March, 31, 2010
---------------
Sales (net refunds of $5,000) $ 88,000
-------------
Operating expenses:
Advertising and promotion 16,021
Commissions 32,550
Consulting 9,238
Franchise expenses 3,313
Office 3,145
Professional fees 2,590
Rent 1,775
Training 11,182
Travel and entertainment 10,049
-------------
Total operating expenses 89,863
-------------
Income (loss) from operations (1,863)
-------------
Other income - interest 1
-------------
Net income (loss) $ (1,862)
Members' equity December 31, 2009 53,688
-------------
Members' Equity March 31, 2010 $ 51,826
=============
The accompanying notes are an integral part of the consolidated financial
statements.
2
BFK Franchise Co., LLC
(A Development Stage Company)
STATEMENT OF CASH FLOWS
(Unaudited)
Three Month
Period Ended
March, 31, 2010
---------------
Cash Flows From Operating Activities:
Net income (loss) during the development stage $ (1,862)
Adjustments to reconcile net loss to net cash
provided by (used for) operating activities:
Increase in Accounts payable 658
---------------
Net cash provided by (used for) operating activities (1,204)
---------------
Cash Flows from Investing Activities:
Purchase furniture & fixtures
Net cash provided by (used for) investing activities -
---------------
Cash Flows from Financing Activities: -
Net cash provided by (used for) financing activities -
---------------
Net Increase (Decrease) in cash (1,204)
Cash at the beginning of the period 33,907
---------------
Cash at the end of the period $ 32,703
===============
Schedule Of Non-Cash Investing And Financing Activities
-------------------------------------------------------
None
The accompanying notes are an integral part of the consolidated financial
statements.
3
BFK Franchise Company, LLC
Notes to Unaudited Financial Statements
Three Months Ended March 31, 2010
Note 1 - Unaudited Financial Information
----------------------------------------
The unaudited financial information included for the three month interim period
ended March 31, 2010 was derived from the Company's books and records without
audit. However, such information reflects all adjustments (consisting only of
normal recurring adjustments) which, in the opinion of management, are necessary
to reflect properly the results of the interim period presented. The results of
operations for the three month period ended March 31, 2010 are not necessarily
indicative of the results expected for the fiscal year ended December 31, 2010.
Note 2 - Financial Statements
-----------------------------
For a complete set of footnotes, reference is made to the Company's financial
statements for the year ended December 31, 2009 which are filed with this
report.
4
PRO FORMA FINANCIAL STATEMENTS
B2 Health, Inc. and BFK Franchise Co., LLC
PRO FORMA CONSOLIDATED BALANCE SHEET
December 31, 2009
B2 BFK Adjustments Consolidated
Health, Inc. Franchise (See Notes) Balance
------------------------------------------------------------------------------------
ASSETS
Current assets
Cash $ 121 $ 33,907 $ - $ 34,028
Accounts receivable - 29,000 29,000
Note receivable - related
party - 500 500
Inventory 3,412 3,412
Marketable securities 4,901 4,901
Security deposit 200 200
--------- --------- --------- ---------
Total current assets 8,434 63,607 - 72,041
--------- --------- --------- ---------
Total Assets $ 8,434 $ 63,607 $ - $ 72,041
========= ========= ========= =========
LIABILITIES
& STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 5,923 $ 9,269 $ - $ 15,192
Related party payables 13,875 650 14,525
Interest payable 1,307 1,307
--------- --------- --------- ---------
Total current liabilities 21,105 9,919 - 31,024
--------- --------- --------- ---------
Total Liabilities 21,105 9,919 - 31,024
--------- --------- --------- ---------
Stockholders' Equity
Preferred stock, $.10
par value; 1,000,000
shares authorized;
none issued and
outstanding - - -
Common stock, $.001
par value; 50,000,000
shares authorized;
775,500 shares issued and
713,000 outstanding 78 78
Members' equity 50,000 (50,000) A
Additional paid in capital 272,060 50,000 A 322,060
Treasury stock at cost (25,000) (25,000)
Accumulated earnings
(deficit) (274,406) 3,688 (270,718)
Accumulated other
comprehensive income 14,597 - 14,597
--------- --------- --------- ---------
Total Stockholders' Equity (12,671) 53,688 - 41,017
Total Liabilities and
Stockholders' Equity $ 8,434 $ 63,607 $ - $ 72,041
========== ========= ========= =========
1
B2 Health, Inc. and BFK Franchise Co., LLC
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
BFK Franchise
May 19, 2009
B2 Health, Inc. (inception)
Year ended through
December 31, December 31, Adjustments Consolidated
2009 2009 (See Notes) Balance
--------------------------------------------------------------
Sales $ - $ 127,984 $ - $ 127,984
Cost of goods sold - - - -
----------- ----------- ----------- -----------
Gross profit - 127,984 - 127,984
Operating expenses:
General and
administrative 53,351 124,296 - 177,647
Other operating income
Collection of
previously written
off receivables 9,150 - - 9,150
----------- ----------- ----------- -----------
Income (loss) from
operations (44,201) 3,688 -
Other income (expense):
Interest Expense (1,880) - - (1,880)
Interest & Dvidend income 76 - - 76
Realized gain (loss) on
securities (51,659) - - (51,659)
----------- ----------- ----------- -----------
Total other income
(expenses) (53,463) - - (53,463)
Income (loss) before
provision for income
taxes (97,664) 3,688 - (93,976)
Provision for income tax - - - -
----------- ----------- ----------- -----------
Net income (loss) (97,664) 3,688 - (93,976)
Other comprehensive
income (loss) net
of tax
Unrealized gain (loss)
on securities 27,514 - - 27,514
Comprehensive
income (loss) $ (70,150) $ 3,688 - $ (66,462)
=========== =========== =========== ===========
Net income (loss)
per share (Basic
and fully diluted) $ (0.09) $ 0.00 $ 0.00 $ (0.09)
=========== =========== =========== ===========
Weighted average
number of common
shares outstanding 775,500 - - 775,500
=========== =========== =========== ===========
2
B2 Health, Inc.
(A Development Stage Company)
NOTES TO PRO FORMA CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009
Basis of Presentation
The following pro forma consolidated balance sheet as of December 31, 2009 and
pro forma consolidated statement of operations for the year then ended between
B2 Health, Inc. and BFK Franchise Company, LLC are presented to show what
effects the reverse acquisition of B2 Health, Inc. and BFK Franchise Company,
LLC might have had on historical financial information had the transaction taken
place on an earlier date. The pro forma consolidated financial statements are
derived from the historical financial statements of B2 Health, Inc. by BFK
Franchise Company, LLC and assume that for balance sheet purposes the
transaction took place on December 31, 2009, and for statement of operations
purposes May 19, 2009 (inception of BFK Franchise Company, LLC) and January 1,
2009 through December 31, 2009 for B2 Health, Inc. should be read in conjunction
with the historical financial information. The pro forma consolidated financial
statements are not necessarily indicative of the result that would have been
attained had the transaction actually taken place earlier.
Pro Forma Adjustments
Pro forma adjustments from the pro forma consolidated financial statements are
referenced below.
(A) Adjustment to restate common stock to that of B2Health, Inc.
3